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P2 - Corporate Reporting > Standards > Flashcards

Standards Flashcards

1
Q

IAS 2 - Inventories

A

• Held for sale in the ordinary course of business

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1
Q

IAS 1 - Presentation of Financial Statements

A

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2
Q

IAS 7 - Statement of Cash Flows

A
  • Unrealised gains and loses arising from changes in foreign exchange rates are NOT cash flows.
  • However its effect is reported in statement of cashflow in order to reconcile cash at beginning and end of period
  • Presented separately from CF from operating, investing and Finance activities.
  • Includes differences had CF been reported at end of period EX rates
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3
Q

IAS 8 - Accounting policies, changes in Accounting Estimates and Errors

A
  • Change in accounting estimate is different from prior period error
  • Changes in accounting estimates should be recognised prospectively by including in PL in period of change
  • Should also correct in retrospectively in first set of Financial Statements after discovery by reinstating comparative amounts
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4
Q

IAS 10 - EARP

A

Events After Reporting Date

• Adjusting Events

  • Additional evidence of conditions existing at the reporting date
  • Need to be incorporated into the financial statements

• Non Adjusting Events

  • Do not exist at the reporting date
  • Disclose if non disclosure will affect the users ability to make proper evaluations and decisions

DISCLOSURE: Nature of event, estimate of financial effect (or statement that estimate cannot be made)
- Provisions and Contingencies

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5
Q

IAS 12 - Income Taxes

A
  • Separate disclosure of major components of tax expense. including adjustments for current tax of prior periods and deferred tax expense
  • Deferred tax assets can be recognised for the carry forward of unused tax losses to the extent that future taxable profit will be available against which it can be utilised.
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6
Q

IAS 16 - Property, Plant and Equipment

A

DEFINITION
Tangible items that are
(a) held for use in production or supply or goods or services, for rental to others or admin purposes
(b) expected to be used for more than 1 period

RECOGNITION

(a) Future economic benefits probable
(b) Cost can be measured reliably

DEPRECIATION

  • Land normally has unltd useful life
  • At least annual review of UL and depcn method

MEASUREMENT AT RECOGNITION
Include
Purchase price, directly attributable costs, finance costs and subsequent costs

MEASUREMENT AFTER RECOGNITION
Cost model or Revaluation model

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7
Q

IAS 17 - Leases

A

UK GAAP has 90% rule
‘PV of Minimum Lease Payments, discounted at interest rate implicit in the lease, amounts to substantially all (90%) of FV of leased asset’ - to classify as Finance Lease

Lease that includes land and buildings must be assessed (whether finance or operating) separately. Land normally has indefinite economic life. Minimum Lease Payments allocated in proportion to relative FV of interest in each element.

Leased Asset is recognised at the lower of FV of asset OR PV of Minimum Lease Payments (MLP) discounted at interest rate implicit in lease.

Determining whether lease:

  1. Risk and rewards of arrangements
  2. Right to use assets or direct others to use
  3. Right to control the use of the asset
  4. Who obtains much of the benefit
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8
Q

IAS 18 - Revenue

A

Inventory charged to production as part of the cost of sales

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9
Q

IAS 19 - Employee Benefits

A

Employee Benefits

(A) Short Term Benefits

  • Salaries, Annual leave etc
  • Accumulating and Non acc absences

(B) Post Employment Benefits

  • Defined Benefit Plans
  • Defined Contribution Plans

(C) Other Long Term Benefits
(D) Termination Benefits

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9
Q

IAS 21 - The Effects of Changes in Foreign Exchange Rates

A
  • Monetary and Non-Monetary assets and liabilities translated at closing rate
  • Income and expense items translated at rate at date of the transaction or an average rate that approximates to the actual exchange rates.
  • All EX differences recognised in OCI and presented as separate component of equity until disposal where they are reclassified to PL
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10
Q

IAS 20 - Accounting for Government Grants and Disclosure of Government Assistance

A
  • Qualify as Government Grants when - represent assistance by government in form of resources provided in return for past compliance with certain conditions relating to operating activities
  • Determine, apply and disclose appropriate policies covering the acquisition, presentation and measurement in its Financial Statements
  • Recognise when reasonable assurance compliance with any conditions
  • Income is match against related cost intended to compensate
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11
Q

IAS 23 - Borrowing cost

A

N/A

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12
Q

IAS 24 - Related Party Disclosures

A 
Disclosure of entity transactions with related parties 
Related parties
- Parents
- Subsidiaries
- Members of key management personnel 
- Post employment benefit plan

Disclose

  • Nature of relationship
  • Info on transactions and outstanding balances and commitments; necessary for users to understand impact of relationship on Financial Statements
  • Disclose by category of related party and by major type of transaction

EXEMPTION
Government related entities (GRE) exempt from disclosing all transactions between related entity and government and other GRE’s. Instead need to disclose:
~ Name of government and nature of relationship
~ Nature and amount or individually significant transactions

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13
Q

IAS 28 - Associates and Joint Ventures

A

??

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14
Q

IAS 32 - Financial Instruments Presentation

A

???

16
Q

IAS 36 - Impairment of Assets

A

??

17
Q

IAS 37 - Provisions, Contingent Assets and Liabilities

A

Published in 1998 to remedy some abuses

Provision: liability of UNCERTAIN timing or amount

(1) Entities should NOT provide for costs that need to be incurred to operate in the future, if those costs could be avoided by entities future actions
(2) Costs of restructuring are recognised as provision only when entity has obligation to carry out restructuring
(3) Full amount of any decommissioning costs or environmental liabilities should be recognised from date on which they arise

Contingent Liability: disclose UNLESS ‘remote’
Contingent Asset: Disclose IF ‘probable’

18
Q

IAS 38 - Intangible Assets

A

DEFINITION
‘An identifiable asset without physical substance’

Recognise - whether purchased or self created - if:

a) Probable economic benefit (PEB) attributable to to asset will flow to entity
b) Cost of asset can be measured reliably

PEB: based on reasonable and supportable assumptions about conditions that will exist over life of asset

‘Research’ : “Original and planned investigations undertaken with the prospect of gaining nee scientific or technical knowledge and understanding”

19
Q

IAS 39 - Impairment/ Hedging

Replaced with IFRS 9

A

??

20
Q

IAS 40 - Investment Property

A

• Held to (a) earn rentals or for (b) capital appreciation
NOT for
- Use in production or supply of goods or services or for administrative purposes
- Sale in the ordinary course of business

If not Investment Property, then PPE (IAS16)

• Can be valued at FV or cost model
FV
- Dont depreciate 
- Revalue at FV at each accounting date
- Gain or loss to PL

Cost Model

21
Q

IFRS 2 - Share Based Payment transactions

A

Share Based Payment transactions

22
Q

IFRS 3 - Business Combinations

A

Definition - “An integrated set of activities that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs, or other economic benefits directly to investors, owners, members of participants”

Consists of inputs and processes applied to those inputs which have the ability to create outputs

Processes definition: An system, standard, protocol, convention or rule which creates or has ability to create outputs.

23
Q

IFRS 5 - Non current Assets Held for Sale and Discontinued Operations

A
  • DO NOT DEPRECIATE
  • No equivalent UK standard
  • Concept of ‘disposal group’ which along with assets held for sale are presented separately on SOFP. Same with liabilities
  • Consolidated under two lines: Assets + Goodwill and Liabilities at FV less cost to sell
  • UK: exempt from consolidation, included in SOFP as single asset at FV on net proceeds

Definition / Criteria:
• Part of single plan to discontinue major lie of business
• Classified as discontinued on date it meets criteria
• Available for immediate sale in present condition and buyer actively sort
• Sale must be ‘highly probable’
• Sale complete within one year unless circumstances beyond control of entity

FRS requires discontinued operations to have material effect on nature and focus on reporting entity operations

24
Q

IFRS 8 - Operating Segments

A
  • A component of an entity which engages in business activities from which it may earn revenues and incur costs

Qualitative Measures

  • If function is integral part part of business, it may be disclosed as segment even though doesn’t earn revenue.
  • Can report smaller operating segments if believed information will be useful
  • Discrete financial information available and regularly reviewed by the CODM
  • Existence of managers responsible for them

Quantitive measures
• Revenue including external and inter segment is 10% or more of combined revenue of all segs
• 10% or profit or loss
• Assets are 10% or more of all segments

25
Q

IFRS 9 - Financial Instruments

A

Move from OCE to PL (Retained earnings) for year

Recognition in SOFP 
Cost
\+ Share of post acquisition profits
Less dividend received
--------
--------
26
Q

IFRS 10 - Consolidated Financial Statements

A
  • Consider all relevant facts and circumstances when assessing whether it controls an investee
  • Control when ‘Exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its POWER’ over the investee’
  • Rights that give it ability to direct significant activities affecting returns
  • Exposure or rights to variable returns
  • Power to affect the amount of investor returns
27
Q

IFRS 11 - Joint Arrangements

A

Joint Ventures vs Joint Operations

Joint Arrangements
Contractually agreed sharing of control where decisions about relevant activities require UNANIMOUS consent

Joint Ventures
Parties have right to net assets of arrangement
- Recognise as an investment (IAS 28) using equity method

Joint Operations
• Rights to the assets and obligations of the liabilities. And recognise its share in the individual rather than net of all
• A joint arrangement not structured through a separate entity

28
Q

IFRS 13 - Fair Value Measurement

A
  • Fair value is an exit price in the principle market which is the market highest VOLUME and level of activity.
  • Entity must have access to market on measurement date
  • In absence of principle market, it is assumed transaction would take place in most advantageous market

*excludes transactions covered by certain other standards including share based payments (IFRS 2 and IFRS 17)

NonFinancial Assets
FV measurement takes into account market participants ability to benefit by using highest and best use.
Entity needs to consider, physically possible, legally permissible, financially feasible. NOT be legally prohibited.
Costs to transform need to be considered in measurement of best use
In absence of certainty of what is its ‘highest and best use’ use the assets current use

29
Q

FRS 2 - Accounting for Subsidiary Undertakings

A

??

30
Q

FRS 7 - Fair Values in Acquisition Accounting

A

??

31
Q

FRS 10 - Goodwill and Intangible Assets

A

??

32
Q

FRS 15 - Tangible Fixed Assets

A
  • Revaluation loses recognised in PL if result from clear consumption of economic benefit
33
Q

FRS 102 - The Financial Reporting Standard applicable in the UK and Ireland

A

Consolidated financial statements prepared by all parent entities unless :

(1) Company subject to small companies regime
(2) Parent company itself is a subsidiary in larger group which prepares consolidated financial statements that meet requirements of companies act
(3) Not a parent at year end

Exclusions of subsidiaries from Consolidation
(A) Severe long term restrictions substantially hinder the exercise of rights over the assets or management
Measure at cost less impairment OR
FV through OCI
(B) Subsidiary held exclusively for resale and not previously included in consolidation
Measured same as above unless part of investment portfolio then FV through PL

P2 - Corporate Reporting (3 decks)

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